HUNTSVILLE, AL - Don't tell Paul Bracy that running a music and games route isn't rocket science. He's done both and, in some ways, he finds operating equally challenging, and also more rewarding.
Bracy, who recently became a board member of the Amusement and Music Operators Association, founded Bracy's Vending Inc. here more than 20 years ago, while still serving in a civilian capacity for the Missile Munitions Center and School for the U.S. Defense Department. During the day, Bracy was providing training and briefings on some of America's most sophisticated weapons systems to U.S. personnel plus military staff from 40 allied countries. On his own time, he opened the Ebony Club (Butler, AL) in 1971 and soon found himself becoming an operator by default when his machine provider failed to do the job.
When other location owners asked him to handle their machines and service, Bracy plunged into the operating business. Blending a friendly, down-to-earth personality with a highly professional business philosophy, he was a solid success. Within a decade Bracy was providing machines to street routes and college arcades across half the South. BVI was incorporated in 1981.
In building his operation, Bracy largely concentrated on such historical black schools as his alma mater Tuskegee University, plus Tennessee State, Alabama State, Jackson State, Grambling State, Mississippi Valley State and others (at one time BVI had 15 college accounts). Bracy said he made sure to provide the "latest and greatest" equipment, which he believes may have helped recruit prospective students and keep freshmen on campus.
Today, BVI's permanent staff of five in its Huntsville headquarters is supplemented by a crew of part-timers in the field whose numbers can fluctuate from four to 10, depending on demand. BVI operates in a five state territory: Alabama, Mississippi, Louisiana, Tennessee and Georgia. The company maintains warehousing in mini-storage facilities across the region. The business focuses on street locations, mom and pop operations, and still services several colleges.
The challenges faced by BVI reflect the situation of operations nationwide. Bracy is a firm believer in buying new equipment, yet says a tough economy and uncertain legal environment are forcing him to cut back and rely more on older equipment and staples that were paid for long ago.
"Because of the types of locations we service over a five state area, we focus on the latest and greatest to avoid maintenance headaches," Bracy said. "We have many operators who take an unserious approach to this industry, investing $600 in an old machine and make $15 to $20 per week. To stay current, you've got to buy the latest equipment."
At the same time, Bracy admits he has been obliged , reluctantly , to reduce his own company's new investment budget. "Our new equipment purchases have dropped more than 50% compared to 18 months ago," he conceded. "I just don't have available to me the new equipment that would pay for itself. We rotate more since we buy less. The intent is to get more life out of each machine."
But if BVI's new game buys are coming slower these days, the company's owner remains equally adamant that he will not permit his machine inventory to become excessively aged. "We don't deal with a lot of used, out of date equipment," he insisted. "That's too much work to make no money."
One key variable driving BVI's current investment strategy is Alabama's changing legal environment for adult redemption games. "My focus now is to decrease debt as much as possible," Bracy explained, "because I don't want to get caught with a lot of debt and no income" if eight-liners are shut down on a statewide basis. In recent years, adult redemption games have provided a very significant portion of BVI's revenues but their legal status is cloudy , and getting cloudier.
"While we are allowed to run noncash redemption games and gray area games in certain parts of the state, we are not in other parts," he said. "They are the ones that make the money in adult locations. Back in 1996 our legislature passed a non-cash redemption bill that allowed us to have eight liners. But as time went on people went crazy with them. You are not supposed to pay off in cash.
"Our state association had an agreement that we operators would restrict ourselves to four machines per location," Bracy added. "Operators came in from out of state and set up casino type game rooms with up to 300 machines. You had a little Las Vegas with big lights and that appearance is deadly. The state attorney general issued unfavorable opinions and certain counties and municipalities decided to shut them down despite the 1996 law. Now many jurisdictions are saying they will not act one way or the other until there is a definitive ruling by the state courts."
Some cities that permit adult redemption have slapped hefty fees on the devices, Bracy observes. "Here in Huntsville the normal fee was $50 per machine," he pointed out. "Now you have to pay $50 per machine only for five or fewer machines per location; $300 per machine for six to 10 machines; and $750 per machine if you have 11 or more per location. Some big game room operators have already closed their doors. In some other counties, the authorities are closing them down."
Bracy noted that some operators are running a major risk by assuming that the gray area market will continue forever. "We still have some operators out here surviving on gray area games and nothing else," he said. "When those machines go away, you'll see a lot more operators go out of business. They don't have any pool tables, jukeboxes, or amusement video games."
He most emphatically does not intend to be caught in that situation. For BVI, classic staple games remain profitable in tavern locations. "Business is coming back this fall after being terribly soft during the summer," Bracy reported. "I think we are down 30% to 40% for 2002 compared to 2001. We are just now beginning to see a resurgence of income. But I'm pleased to report that the old basics are always profitable: countertops, pool, and music."
As the U.S. national defense budget increases, some of those defense contracts and higher military spending dollars are now flowing once again into Huntsville. Bracy says his locations are beginning to reflect better times. He also notes that demand for amusement equipment is strong enough that he can afford to be selective.
"We get anywhere from five to 10 calls a week from prospective new locations," he said. "We screen them to determine if they will be economically feasible. We ask a lot of questions and if they pass the test, we set the location. It used to be we were vulnerable. My mindset was that if we don't take the location, the competition will. Now we evaluate more carefully. Some locations have a rigid idea of what they want to do. They don't always respect the knowledge and experience of a longtime operator. So there is a lot of turnover in locations and if you don't question locations, you will be a victim of it. Our location base is more stable than some, because of our screening and selection process."
Like many of the best operators, Bracy finds himself educating new location owners about the realities of two businesses: his, and their own. "I meet many dreamers who think they can get rich overnight, or who think two pool tables will allow them to pay off $100,000 debt in two months," he smiled. "We approach our customers with the idea of improving their situation, of course. But we also believe strongly in educating them on what they have, what's available now, and how any particular machine would best be suited in their unique location to improve income and generate more traffic , whether it be teenagers, young adults, or the grown up market. I always tell my customers if you tell me what you would like to earn and it's realistic, I'll put forth a concerted effort to make it happen." He adds, "I truly like seeing them make the money from amusements to help subsidize their operation."
Somehow , perhaps because of his easygoing and even fatherly personality , Bracy manages to convince many location owners to trust his judgment. "Nine times out of 10, when a location owner calls and asks about a specific piece of equipment, it's because they heard that machine was good," he noted. "But the application that machine is being used for by their friend may not be the best application for the person asking. We don't sugarcoat the picture but present the facts as we see them."
Thanks to his honest but constructive advice, Bracy creates very strong bonds with his location owners. "I look at it as a joint venture: that means we have to work together," he said. "And we've got to like each other to work together. We very seldom lose a location to competitors because of our involvement with our partners. If they tell us what their desire is, we keep that as our focus. The clock is running and the mind is thinking all the time. We are customer oriented. Our secretaries say every time I get a new customer, it's like getting a new son or a new daughter because they call me for everything!"
While cautioning locations that amusements can't work miracles, Bracy does stress that a professional operating company can make a solid contribution to the bottom line. "My philosophy is quality products and quality service," he said. "We have grown the business to a point where we provide state of the art equipment if we take a location. Then we have on-time service: if somebody calls with a problem, we have somebody there within eight to 24 hours, allowing for travel and distance."
For BVI, as for the U.S. industry generally, "Pool is our biggest money-maker," Bracy said. "You can still buy a table at a reasonable price and customers see 75¢ as a reasonable price to play. We participate in league play with the Camel League; we field several teams that travel from one bar to another throughout the city three or four nights a week. When they are not playing the league, they practice to sharpen their skills, so it's a real success."
CD MUSIC STANCE
In the music arena, BVI is holding steady with compact disc technology. "I have CD players only and refuse to go into downloading because of the percentage of income the customer would get," Bracy declared. "Eventually I may get to that but right now I'm invested in CDs and have no desire to change. I am diversified with three different brands. This allows you to offer a different appearance to different customers."
Bars and taverns are BVI's major music sites. The company takes the cost of new CDs off the top and splits the remainder with locations. Depending on customer tastes, Bracy's team provides locations with blues, rock, R&B, country, some jazz, and dance music.
Addressing the modern-day video staple for tavern accounts, Bracy is brief and to the point: "Countertops do very well; we love them."
Pinball, on the other hand, evokes a degree of ambivalence from Bracy. He likes the high resale value, but looks askance at relatively low weekly earnings and frequent maintenance demands. "We mostly place pinballs in our college game rooms," he said. "They perform okay, but not always as well as you would think or hope, based on cost. Even in high traffic sites, pinball usually earns no more than $50 to $60 per week. To me that's not good. One positive factor is it's like a Mercedes: if you have it today, the value is pretty much the same tomorrow. While you don't make as much money, you can resell in a year or two and get most of your money back. As for service, today's pinball games are more reliable but still lots of headaches because of so many moving parts."
Amusement video games accounts for perhaps 20% of BVI's overall revenues. This type of equipment is steadily dwindling in Bracy's inventory, and the company is even using fewer videos in its college game rooms. "Today's video games are not as attractive as they were a few years ago because most of the college kids have PCs in their rooms; they can play games on the Internet for free," Bracy said. "They don't have an incentive to enter the game room to play 50¢ to start and 50¢ to continue. Also, the games are simply not that exciting. Game play is familiar and the cost is ridiculous. To buy a $5,000 piece of equipment that earns $35 or $40 that must be split with a location owner, is not an attractive proposition. If I can avoid it, I do"
Bracy's sales resistance to video is in fact fairly high. "Manufacturers will have to lower their prices," he said simply. "My college locations say to me from time to time, 'We need new equipment.' I usually give the same answer, 'Yes, if we could get some playing time on it.' I show them on paper the cost of the game and the return on investment. By the time another generation of the game appears, we haven't paid anything on the first one. We are in business to make money. If we get in trouble, it won't help the location and it won't help us. I think all operators are basically following the same approach."
Aiming amusement video at the youth market hasn't been entirely written off by BVI, however. Bracy is investigating the possibility of installing a "PC bang" facility on one or more of his college campuses. "At last fall's AMOA Expo," he explains, "I saw a local area network (LAN) setup that allows players to play games online with computers. This idea intrigues me because it capitalizes on something the kids are already doing and, once you pay for the hardware, the cost of upgrading the software to keep it current might be relatively low."
In contrast with his critical take on here-today-gone-tomorrow video games, Bracy extols the long-lived virtues of coin-operated vending equipment. Washers and dryers are a natural for BVI, particularly in college markets. "We operate a lot of washers and dryers in student dormitories as well as in Laundromats to service the campus," Bracy said. "It is a very lucrative business; we have been doing it 10 to 15 years. If you buy new Maytag or SpeedQueen equipment today and maintain it well, it will last 10 years. At the end of the first year, no one is hollering 'Give us new, state of the art washers and dryers.' Once you set the location, you simply maintain it and you are okay."
Looking to the industry's future, Bracy gives an analysis that is characteristic of his positive yet realistic attitude. "Everybody knows our industry is going through a tough period," he says. "I'm an optimist about the industry, but you have to work at it. Conditions could turn around, but to what extent? We don't know, to be honest. We've seen it like this before. But the chances are when good times come back, they won't be as strong as they were in the past because of the increased interest in personal computers, the growing competition from legalized gambling, and what have you. I'm hoping conditions will improve enough that all of us operators can make a little money and keep things going."
The industry's greatest need, Bracy believes, is for appealing, affordable new equipment. "Something has to come out that grabs people and says, 'Play me!' Right now I don't see that type of equipment," he said. "When we had 'Mortal Kombat II' in a college location a decade ago, it generated up to $700 a week. When you get used to that level of return, and then see the next generation of games costs more and makes less, it poses serious questions."
In the meantime, BVI continues to strive to provide its locations with the best equipment, the best service, and the best business partnership available. "We try to portray a professional approach for all our business endeavors," Paul Bracy smiled. "I love the business. Making things happen, taking a location and working with the people to make sure they achieve their earnings goals by lining up equipment , this is what I enjoy. I would sum it all up with the term 'professionalism.'"